As a small business owner, you don’t have time for anything trivial. And you especially don’t have time to go through the thousands of pages in the Affordable Care Act (ACA) to see what your small business health insurance requirements are.

That’s what we’re here for. In this article, we’ll cover the latest ACA news so you can decide how to offer health insurance to your team in 2020.

What small business health insurance requirements are changing in 2020?

Most ACA requirements are staying the same, but there are still some big changes you should know about as an employer. 

1. The individual mandate has been eliminated

In previous years, the ACA required everyone to have health insurance. In fact, anyone who didn’t would’ve had to pay a fine. Now, that’s no longer the case.

2. Some states are adding their own individual mandates

In response, some states are adding their own individual mandates to continue pushing individuals to have health insurance.

  • States with individual mandates already in place: D.C., Massachusetts, and New Jersey
  • States with individual mandates starting in 2020: California, Rhode Island, and Vermont

In these states, if your employees don’t have health insurance in 2020, they’ll be flagged when they file taxes and will need to pay a fine. The maximum penalty is the average yearly premium of a bronze plan in that state. Basically, the states are saying, “buy health insurance, or else you’ll pay for it anyway.”

While individuals in these states probably won’t be happy if they don’t already have health insurance, these mandates can actually help you as an employer. If you offer health insurance, it could make it easier to recruit and retain talent in these states.

There’s still not many details around how each state will roll this out, but it’ll likely look similar to ACA filings. In other words, these states will probably expect a similar (if not identical) document to Forms 1094-C and 1095-C

3. Associated health plans (AHPs) are facing legal scrutiny

Associated Health Plans (AHPs) allow similar small businesses to band together and negotiate their insurance plans. Recently, the federal government expanded and changed AHPs significantly. 

These changes include:

  • The definition of an employer was expanded to include self-employed individuals.
  • Definitions for what constitutes a valid association were loosened. Before, the requirements were far more strict, e.g. businesses had to be in the same industry. This was changed so that businesses in the same geographic area or state could also form associations.
  • Essential health benefits, which are benefits ACA-compliant plans have to offer, do not apply to AHPs.

However, in 2019, a federal judge invalidated most of these new regulations, and there’s no indication if this decision will ever be overturned. Because of all the changes, you may want to hold off looking into AHPs until the government decides on what they want.

4. Health Reimbursement Arrangement (HRA) options are expanding

Finally, there are more HRA options businesses can offer. We’ll get to this next.

What are my small business health insurance options in 2020?

In 2020, you’ll have even more small business health insurance options than ever before.

Here, we’ll compare two types: traditional group health insurance and health reimbursement arrangements (HRAs).

Traditional group health insurance

Traditional group health insurance is probably what you picture when you think of health insurance. You buy a plan that covers your employees (and sometimes their dependents). 

While group health insurance will usually cost you more than an HRA (it generally requires you to contribute at least 50% of the costs), there are a few reasons why you still may want to offer it:

  • It can help you recruit and retain talent. Many surveys have found that health insurance is the top thing employees are concerned about, and they’re less likely to leave a company if they’re satisfied with their health insurance. Providing health insurance shows you care about your employees and their family.
  • With the right partner, it could require less administrative work. Health insurance brokers can curate options for you, and unlike HRAs, you don’t have to worry about checking to make sure your employees are actually purchasing insurance.

Plus, you can help mitigate some of the cost by taking advantage of “Guaranteed Availability” from November 15 to December 15. During that period, insurance carriers aren’t allowed to reject an application from a group even if you don’t meet the participation or contribution requirements.

Health Reimbursement Arrangements (HRAs)

Health Reimbursement Arrangements, sometimes called Health Reimbursement Accounts or HRAs, allow you to help employees pay for their out-of-pocket medical expenses. 

Generally, it involves two steps:

  • You fund the account
  • Employees submit receipts to get reimbursed for their expenses

HRAs are a great way to dip your toes into health insurance—there’s a lower barrier to entry because there are fewer requirements around what you need to contribute and who needs to participate. They can also be a good option if you’re intimidated by the cost of traditional health insurance and want to ensure you have no unexpected costs. 

However, if you offer an HRA, you should assume your employees will use the money—people usually collect at least 70% of the available funds.

But HRA options are expanding, so it’s important to identify the right one for your business and employees. Here’s an overview of the different types:

1. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

QSEHRAs are a relatively new HRA option for small businesses with fewer than 50 full-time employees. They’re popular among employers who have not offered health insurance in the past.

If you offer a QSEHRA, you can’t offer group health insurance. Instead, your employees are responsible for getting their own health insurance and you reimburse qualified medical expenses—including their health insurance premiums—tax-free.

The best part of QSEHRAs: they’re ACA-compliant even if you don’t hit the 60% minimum value standard, and there are fewer rules around them than if you were to offer a plan through ACA.

2. Individual Coverage Health Reimbursement Arrangement (ICHRA)

ICHRAs are a brand new type of HRA that you can start offering on January 1, 2020. The DOL and CMS should be releasing templates, calculators, and other resources to give more guidance soon, but here’s what we know so far.

Like other HRAs, ICHRAs help you reimburse employees (tax-free) for eligible medical expenses. This can include health insurance they buy on their own, as long as their plan meets ACA standards.

ICHRAs differ from QSEHRAs in a couple of ways. With ICHRAs,

  • Any business—regardless of size—can offer it.
  • You can offer it even if you offer group health insurance—you just can’t offer an ICHRA to an employee who is covered under your group health plan. For example, you can offer group health insurance to full-time employees and ICHRAs to part-time workers.

The best part of ICHRAs: they can help you meet the ACA employer mandate as long as you offer an affordable level of reimbursement. “Affordable” means the amount after reimbursement that an employee would pay for the lowest cost silver plan available on the individual marketplace must be less than 9.86% of their annual income.

3. Excepted Benefits Health Reimbursement Arrangement (EBHRA)

EBHRAs aren’t as applicable to small businesses, since you have to offer them alongside traditional group health insurance. 

Since 80% of small businesses are worried about the cost of health insurance alone, most probably won’t offer both traditional group health and an EBHRA on top of that.

If you can afford to offer both, it may make more sense to stick with group health insurance and just increase your contribution. That way, you lose some of the administrative burden of having to review requests for reimbursement with the EBHRA.

Types of businesses it’s good forOffered with group health insurance?Contribution limitOther things to keep in mind
QSEHRABusinesses with fewer than 50 FTEsNo$5,250
  • Can be used to reimburse spousal coverage
  • Requires administration to confirm enrollment
  • May actually hurt low-income employees’ ability to get tax credits
ICHRABusinesses on a budget that need to meet the employer mandateYes—if you offer them to different classes of employees (e.g. full-time vs. part-time)No limit
  • Can’t be used to reimburse spousal coverage
  • Requires administration to confirm enrollment
Traditional group health insuranceBusinesses that can afford a more expensive option that employees preferN/AAt least 50%*
  • Networks are generally better than individual market options
  • Has tax advantages for employers and employees
EBHRABusinesses that want to offer an extra benefit on top of group health insuranceYes—you must offer it alongside traditional group health insurance$1,800
  • Can’t be used to reimburse individual or other group insurance premiums
  • Can reimburse cost-sharing (like copays)

*Except for the Guaranteed Availability period, which runs from November 15 through December 15.

Feeling overwhelmed by your options? At Gusto, our licensed benefits advisors can help you find the right coverage for your team and budget. Learn more about how we can help you navigate the world of small group health insurance.

Topher Reynoso Topher leads compliance, carrier relations, and business infrastructure efforts on Gusto's Benefits Operations team. He is a serial entrepreneur and founder of PlanGrade, where he helped employers navigate the complex regulatory issues involved with managing employee benefits. Topher has previously worked in compliance and finance and holds a J.D. from Penn State University.
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